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Modern slavery: businesses to take action

The UK government’s Modern Slavery Act 2015 (the Act) is intended to “stamp out modern slavery”. Modern slavery is considered to be a particularly complex crime, encompassing human trafficking, slavery, forced labour and domestic servitude.

RATIONALE FOR CHANGE

The UK’s current legislation is no longer considered fit for purpose with modern slavery in the UK considered to be a substantial problem. As well as consolidating the existing legislation the Act will (amongst other things):

 increase the maximum sentence for offences to life imprisonment;

create two new civil orders (Slavery and Trafficking Prevention and Risk Orders) to help courts prevent modern slavery;

make greater provision for the protection of victims;

establish a new Anti-Slavery Commissioner (tasked with preventing modern slavery, protecting victims, prosecutions, encouraging national and international partnerships and acting as a central point for the collection of data); and

require large businesses to disclose each year, what steps they have taken to ensure there is no slavery or human trafficking in their business or supply chains.

BUSINESS TRANSPARENCY

During the Act’s progress there was a suggestion that businesses could do more to tackle modern slavery and, in particular should not turn a “blind eye” to it. Evidence was heard that UK supply chains were vulnerable to being infiltrated by modern slavery.

Which companies does the provision apply to?

The business transparency provision has a wide application. It potentially applies to a “commercial organisation” which includes a body corporate or partnership, wherever incorporated or formed, which carries on a business or part of a business in any part of the UK, making this obligation extra-territorial in scope. The organisation does not need to be UK domiciled. The Act and the business transparency provision are not restricted to UK entities but will apply to any business, wherever formed that is within scope.

A commercial organisation is within scope if it:

supplies goods or services; and

has a total turnover in excess of a prescribed amount

The Government has not yet proposed or confirmed the level of turnover threshold which will be detailed in secondary legislation. A recent Government consultation suggests that the threshold will be based on a minimum turnover of the whole commercial organisation i.e. group. The regulations are expected to set out what monies are to be treated as an organisation’s turnover and make clear that an organisation’s total turnover includes turnover both within and outside the UK. There is currently no proposal to require a minimum amount of turnover to be generated in the UK.

What must companies do?

The Act requires all “commercial organisations” over a certain size to produce a “slavery and human trafficking statement” for each financial year. The statement must disclose steps they have taken to ensure their business and supply chains are slavery free, or a statement that no such steps have been taken. The Government is clear that it wants disclosure to be meaningful and expects disclosures to differ from company to company but will provide guidance on the kinds of information that may be included. It does not require organisations to take any particular action, aside from producing a statement, or meet a particular standard. The Government’s intention is that by requiring businesses to be more transparent about what they have, or have not done, consumers and investors will have the information to call for more action if they consider it appropriate.

If the organisation has a website it must:

publish the slavery and human trafficking statement on that website; and

include a link to the statement in a prominent place on the website’s homepage.

If the organisation does not have a website, it must provide a copy of the slavery and human trafficking statement to anyone who makes a written request for one within 30 days.

TIMING AND NEXT STEPS

Since 2013 UK quoted companies have had to report, in their annual strategic report, on human rights “where relevant for an understanding of the business” and many businesses’ corporate and social responsibility programmes will already consider this issue. In addition, international businesses may be required to comply with similar provisions under another jurisdiction’s legislation, for example in California. The breadth and extraterritorial nature of the UK’s obligation, with the absence of a requirement for a certain level of turnover to be generated in the UK will potentially have much wider resonance. It may be prudent for large businesses to consider their procedures now. If within scope, businesses will need to consider whether they have adequate procedures to ensure slavery and human trafficking is not taking place in any of their supply chains or in any part of their group’s business.

The Act was granted Royal Assent on 26 March 2015. The transparency in supply chains provision has a provisional implementation date of October 2015. Knowing which businesses are going to be within scope is clearly key. With the Government’s consultation on this point closing in May, businesses are unlikely to have clarity on this point more than a few months before they are required to disclose what, if any, action they have taken to ensure there is no modern slavery either in their business or supply chains.

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